Wholesale Prices Up 2.4% for ‘83-’84, a 20-Year Low

WASHINGTON —  Wholesale prices rose a modest 1.8% in 1984 as the country posted the best back-to-back inflation years in two decades, the government said Friday.

Economists predicted that a strong U.S. dollar and sagging oil prices should keep inflation under wraps in 1985 as well.

For 1983 and 1984, prices at the wholesale level increased 2.4%. Not since a 0.3% gain in 1963-64 has the country enjoyed such a low rate of inflation.

The Labor Department also released an inflation report for December which showed that prices rose 0.1%, a marked improvement over a 0.5% gain in November.

Economists gave much of the credit for the price stability to a world oil surplus that has brought the Organization of Petroleum Exporting Countries into disarray as the oil cartel struggled to impose production cuts to prop up prices.

Also helping to keep prices down in the United States has been the surging strength of the dollar. While the country will suffer its worst trade deficit in history, consumers have reaped the benefits of a flood of imports made cheaper by a strong dollar.

At the White House, spokesman Larry Speakes said the 1983-84 inflation stability was a “20-year record which demonstrates the President’s success in maintaining steady economic growth with low inflation.”

Speakes said the low prices at the wholesale level should “translate into consumer cost stability as we enter 1985.”

Private economists agreed, with some predicting that 1985 could turn in an even better performance against inflation than 1984.

“There are no signs of problems on the inflation front,” said Allen Sinai, chief economist for Shearson Lehman-American Express. “1985 should produce another good year for prices.”

Michael Evans, president of Evans Economics, a Washington forecasting firm, predicted that wholesale prices will rise only 1% this year.

“Inflation is on the run for the next few months and we are going to see some very positive numbers as oil prices continue falling and recent gains in food prices moderate,” he predicted.

The 1.8% rise in the Labor Department’s Producer Price Index for 1984 followed a 0.6% gain in 1983, the best performance since a 0.5% increase in 1964. As recently as 1980, wholesale prices were rising 11.8% a year as the United States and the rest of the world struggled to keep up with skyrocketing oil prices.

Food Prices Gained 3.8% Oil is currently selling on the spot market at around $27 a barrel, down from $36 a barrel in 1980. Sinai predicted that oil prices would likely fall another $2 per barrel in 1985, shaving one-half percentage point off the inflation rate.

For 1984, overall energy prices fell 4.1%, a decline that came on top of a record 9.2% drop in energy prices the year before.

Gasoline prices dropped 5.5% last year, following a 10.1% decline in 1983. Heating oil prices dropped 4.7% in 1984 while natural gas prices rose a modest 1.2%.

Food prices were up 3.8% last year, only a slight deterioration from the 2.3% increase in food costs during 1983. A huge 17.2% drop in vegetable prices helped in holding costs down while fish prices rose the most, gaining 31%.

The department gave these other details on wholesale prices:

New Car Costs Up 0.5% --Food prices in December were up 0.5%, following a 0.7% gain in November. Prices increased for fish, fresh fruit, eggs, beef and pork while declines were posted for vegetables, dairy products and coffee.

--Monthly energy prices fell 1.3% after two consecutive increases. Gasoline prices were down 1.2%; heating oil prices fell 2.9% and natural gas prices were off 0.5%.

--New car prices rose 0.5% in December while light truck prices rose 0.7%. For the year, car prices were up only 0.6% and light truck prices rose 3.4%.

In all, the Producer Price Index for finished goods stood at 292.4 in December, meaning that goods costing $10 in 1967 would have cost $29.24 last month.

Retail prices rose at an annual rate of 4.1% in the first 11 months of 1984, only a slight deterioration from the decade-best 3.8% increase in 1983. The final consumer price report for 1984 is due out on Jan. 23.